9-Chart Wednesday (5/11/22)

By Charlie Bilello

11 May 2022

This week’s post is sponsored by YCharts. Mention Charlie Bilello to receive 20% off your subscription when you initially sign up for the service.

9 charts from the past week that tell an interesting story in markets and investing…

1) Two Steps Forward, One Step Back

That’s the path all investors must take, as there is no upside without intermittent downside. During the stimulus-driven boom we leapt forward, and now we’re stepping back at a rapid pace.

The Nasdaq 100 ETF ($QQQ) and Russell 2000 Small Cap ETF ($IWM) have given back all of their gains from 2021 after declines of 26% and 29% respectively…

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The S&P 500 is holding up better with a 17.7% drawdown, but this is still the largest correction since February-March 2020 and the longest since 2015-2016 (126 days and counting).


It is also the 2nd worst start to a year for the S&P 500 in history…


2) Are We There Yet?

While the declines in the major indices have been punishing, they’re but a flesh wound in comparison to the high growth segment of the market where 70-90% drawdowns have become commonplace…

Data via YCharts

“Are we there yet?” That’s the question investors keep asking, wondering if a bottom is near or if there’s more downside ahead. But as was the case on the way up, there’s no answer as the market is entirely driven by sentiment in the short run.

And that sentiment can not only shift on a dime, but continue in the direction of greed or fear for much longer than you expect. Just one of many examples…

Peloton ($PTON) is now 93% below its all-time high of $171 in January 2021. Its IPO price in September 2019 was $29. This week it traded as low as $11.

What changed? The narrative, moving from everything is awesome to everything is awful. And so the price investors are willing to pay changed as well, from over 20x sales for Peloton last year and less than 1x sales today.

3) Hold On for Dear Life (HODL)?

Equities aren’t the only risky asset class feeling the pain of higher interest rates and tighter monetary policy. Crypto benefitted more than anything else from the unprecedented era of easy money (Bitcoin: +201% in 2020, +66% in 2021) and is unsurprisingly being hit harder on the way down.

Bitcoin ($BTC) has now fallen 57% from its peak, its largest decline since 2017-18.


When it comes to Bitcoin bear markets, however, perspective is always necessary. Even after the recent declines, long-term HODLers still have tremendous gains…

4) The Holy Grail Indicator

There aren’t many things to be bullish about these days, with the possible exception that nearly everyone is bearish.

Right on cue, CNBC ran its “markets in turmoil” special last week, the only indicator with a perfect track record…


Before you get too excited, there’s an important caveat: the data set of “Markets in Turmoil” specials starts in 2010, and is therefore limited to a buy-the-dip bull run where corrections have been short lived. When the next longer-term bear market comes, there will surely be losses following these specials.

That said, whether you are a trader playing for a short-term bounce or an investor looking to add long-term exposure, there’s been no better contrarian signal. You should always prefer a “markets in turmoil” special to regular programming because panic creates opportunity.

5) The Other Side of Mania

One by one, the manias of the past few years are unwinding.

The latest example: Rivian ($RIVN), which is now down over 86% from its high (my post on Rivian from last year).

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Here’s a look at the drawdowns of other electric vehicle companies…

6) What A Difference a Year Makes

This is what was going on in markets a year ago…

And after perhaps the most obvious top indicator of all time, this is what has transpired since…

7) Moving Towards Normalization

As expected, the Fed hiked rates 50 bps to a new range of 0.75%-1.00% and announced plans to reduce their balance sheet starting in June (at a pace of $47.5 billion per month for the first 3 months, and $95 billion per month thereafter).

Importantly, the Fed stated their newfound commitment to fighting inflation with additional 50 bps hikes, and the market is expecting another 50 bps in June and again in July. That would bring the Fed Funds Rate up to 1.75%-2.00%, a rapid move back towards normalization.

The Fed is not alone in hiking rates due to higher inflation, with 20 other major Central Banks also tightening policy in recent months (see blue highlights in table below)…

8) The Greatest Jobs Comeback in History

20.1 million private sector jobs were lost from February through April of 2020.

20.3 million jobs have since been added back.

With a new high in ADP Nonfarm Payrolls, the greatest jobs comeback in history is complete…

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Will the growth in jobs continue? That seems likely, given the record 11.5 million job openings in the US which is 5.6 million more than the number of Unemployed persons. We’ve never seen a spread this high.

9) Bear Market in Covid

Here’s one bear market that we all hope continues: US Covid-19 deaths have fallen to their lowest levels since the start of the pandemic (230/day), down 93% from their peak in January 2021(3,500/day).



And that’s it for this week.

Have a great week everyone!


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